Anyone with even a minor interest in the topic of fintech knows its impact on traditional financial institutions is considerable. By offering customers convenient alternatives to various financial services, fintech companies threaten the continued dominance of banks and similar institutions.
That doesn’t mean banks are going to be completely replaced. They simply need to adapt to changing customer expectations. The following examples illustrate some of the ways they are already doing so. Whether you work for a bank, work for a fintech startup, or you’re simply interested in this subject, they’ll help you better understand how traditional institutions may survive the fintech revolution.
Fintech products are often improved versions of existing services. They aren’t re-inventing the wheel. They’re simply making it better. An example of this is fintech bank-like accounts that don’t penalize consumers for insufficient funds. Knowing they don’t have to worry about fees attracts users to these products for obvious reasons.
Banks are starting to react accordingly. Discover, for instance, is one long-standing financial services institution that has moved to eliminate fees associated with its online banking accounts.
This may seem like a “no-brainer.” If customers are upset about penalties your competitors don’t impose, they’ll take their business elsewhere. You thus need to jettison those penalties to ensure that doesn’t happen.
The problem is, collecting penalties is actually a major way banks make money. Eliminating them means eliminating a significant source of revenue. It’s a necessary step, but it will be interesting to see the effect it has on Discover and others moving in this direction.
Collaborating with Startups
Collaborating with fintech startups may be the most effective long-term solution for banks looking to stay afloat in these changing times. That’s because partnerships with startups and traditional institutions can genuinely benefit all parties involved.
Banks get to work with innovators who use the latest tools and technology to deliver an improved customer experience. Startups get to take advantage of the knowledge and experience of people who’ve already navigated the regulations that apply when you’re offering a financial service.
Customers benefit as well. Startups develop products that make their lives easier, and banks help those products reach customers sooner rather than later.
Focusing on Customer Service
For a very long time, traditional banks didn’t need to worry about customers going elsewhere for financial services. When you only have a few major competitors, it’s easy to overlook the importance of proactive customer service. The fintech revolution has changed that.
Decision-makers at banks that have existed for literally hundreds of years are now expressing the need to return to a customer-centric way of doing business. Specifically, they want to focus on outreach. Their goal is to collect regular feedback to determine exactly what they can do differently to better meet customer expectations. This is a simple strategy. Acting on it, however, may not be as easy.
Consider the example of personalized service. Innovations in artificial intelligence and similar technologies have made it easier than ever to collect information about each and every customer when he or she uses a product or interacts with a business. As a result, financial institutions (and other businesses in general) using AI in this capacity are able to provide a degree of personalized service that customers now expect.
A bank might learn its customers also want this type of attention. Offering it would require aggressively implementing AI solutions. That’s not necessarily as easy as hiring a few experts. To truly make the changes customers want, banks may need to devote substantial time and resources to developing new products and services.
Offering Personal Attention
Experts and users alike know fintech is here to stay. That’s not to say there aren’t certain challenges fintech entrepreneurs must guard against. One is a lack of human connection. By relying on technology to deliver services and experiences to customers, fintech startup owners run the risk of losing the personal connection that’s essential when handling customers’ money.
Many people aren’t ready to trust a machine with their financial futures. When they want to discuss their saving or investing opportunities, they want to meet with a real person and have a conversation.
That’s another way that banks are responding to fintech. Instead of trying to offer the same tech-based services, they are highlighting how personal attention distinguishes traditional institutions from many fintech companies.
It’s important for fintech entrepreneurs to pay attention to this strategy. Again, they might benefit from partnering with banks that maintain a personal touch. By combining the best of both worlds, it’s possible for fintech and banks to prosper in the years to come.